Why are XE.com and Bloomberg saying that the Baht is at about $33.50 but the Thai banks are buying it for about $35.50?

Keywords: Offshore and onshore.

Keywords: Offshore and onshore.

But in the past, the xe and bloomberg rates were always fairly similar to the rates at the Thai banks. Why is it different now?

2 tier x-rate is currently in place. My experience:-

Early last week I withdrew 20K Baht from a ATM using my AUD card at rate of 25.3 Baht to the AUD.(Offshore Rate) Later I had my office staff in Perth deposit a sum in AUD into Kasikornbank account at 27.6 Baht to the AUD. (Onshore RATE).

No more ATM Transactions for me!!! Get the picture??

I sent 10K to the UK last week, was expecting it to cost me 670,000 Baht or so, cost 707,000 Baht in the end!!!

I don't know about the current policy in Thailand.

But this is an interesting and possibly related fact to the THB:

All I know is that there were 2 rates being used on the Philippine peso in the Philippines in the 1980s.

There was an "official rate" being "enforced" by then dictator Ferdinand Marcos who was trying to make the Philippine peso look stronger than it really was. All "legal and official" transactions in the Philippines (used by banks, money changers, etc.) had to use this official rate.

On the other hand, the Philippines at that same time also had a "black market" or "underground" rate which "illegal" traders would use, which was similar to the USD/PHP rate in the world market.

Cheers!

Because the baht is not a freely convertible currency, both exchange and interest rates find their levels in separate markets onshore and offshore.

The quick and dirty explanation of what is happening now is that the idiotic screwing around the Bank of Thailand has engaged in recently has driven the two markets much further apart than they have been in the past. The baht has been consistently weaker in the offshore market and thus short-term interest rates have also been much higher there (i.e. since there is more competition to attract the holding of a weaker currency).

Because the baht is not a freely convertible currency, both exchange and interest rates find their levels in separate markets onshore and offshore.

The quick and dirty explanation of what is happening now is that the idiotic screwing around the Bank of Thailand has engaged in recently has driven the two markets much further apart than they have been in the past. The baht has been consistently weaker in the offshore market and thus short-term interest rates have also been much higher there (i.e. since there is more competition to attract the holding of a weaker currency).

The baht has been consistently STRONGER in the offshore market. You buy 1$ with 35.90 baht in Bangkok Bank while you can purchase 1$ with less then 34 baht in the offshore market.

So why the TBH in offshore market is also getting high interest rates remains a real mistery for me.

In a currency market that is highly speculative, as it would seem the Baht is subject to of late, the rate changes constantly as does the stock market.

XE,com uses a "mid market rate" whatever that means. If the baht is up and down a baht or more in any trading day, thats as close as we are going to get in comparing rates from different sources.

I used my Visa Debit card for a transaction at noon on Monday the 5th when xe.com and most exhchanges were quoting 34.200-400. When the transaction was recorded in my account during the working day on the 7th, the rate I received was 35.386. In the time between my use of the card and the date the transaction cleared my account, I didn't see a single quote anywhere in the 35 range.

A friend told me that visa has a daily rate of exchange posted in thier wesite as do most others involved in conversions. To conclude that their conversion rate is "offshore" when they include a 1% transaction fee in any of their conversions, is illogical because the rate, plus fee, I received seems more in line with the "onshore" rate.

Whether this adds light to this thread or darkness I just don't know.

Dual rates, making less profitable for speculators.

The Bank of thailand introduced the capital controls of grabbing 30% of money coming into thailand(with some execeptions) so the onshore rate is not a free market rate....ie demand is reduced artificially thus the baht rate in thailand is artficially weak (onshore) ....,

offshore the supply are demand is not affected so the baht is nearer its true market level ie higher/stronger......i would guess the interest rate is higher offshore as a higher rate is needed to attract limited baht funds.....

If I had money in Thailand... How could I get the offshore rate when I send it out?

'jakesideas Posted Today, 2007-02-15 14:50:36

If I had money in Thailand... How could I get the offshore rate when I send it out?

Reply simple ...send the money out in baht .

Interesting anecdote :

Does anyone know or heard of a similar situation anytime in history where a currency is worth more outside a country than inside ?

The only case I am aware of was the Swiss Franc , especially large denomination banknotes such as the SF1000 note, during World War II.

Like diamonds they could be smuggled out of countries such as Nazi Germany internally hence they were at a premium against their true exchange rate outside Switzerland. Presumabably the US $ 10,000 AND $5000 bills were at a similar premium.

unofficial money changers in chinatown and saphan kwai will give you a much better rate than the banks, if you have the nerve for that sort of thing. I changed a large sum once and it neary gave me a heart attack. Since then I've been resigned to the banks.

Does anyone know or heard of a similar situation anytime in history where a currency is worth more outside a country than inside ?

I may be wrong but I think this situation currently applies to China